We have decided to give some money to our daughter, who recently got married, to help with a down payment on a home. Not to be a naysayer, but what would happen in the event of a marriage breakdown?
We asked Jillian Bryan, senior investment adviser at TD Wealth, to answer this one.
“Among my clients, helping a newly married child with the down payment on a first home has become a familiar gesture,” Ms. Bryan said. “Yet, the question that often follows is more sober: What happens to that contribution if the marriage ends?”
She pointed out that Canadian courts will look closely at the nature of any financial transfer from parents to an adult child. A caveat: If the contribution is undocumented or treated informally, it may be interpreted as a gift and absorbed into the marital estate.
“That can alter how the home is divided and whether the parents have any path to recovering their funds,” said Ms. Bryan. “Court decisions across several provinces have highlighted the same pattern – without clear evidence of a loan, judges may assume the intent was to assist the household, not just the child.”
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This is why, in practice, many clients choose to structure the support as a documented, interest-free loan and register it on the property’s title, typically in second position behind the primary mortgage.
“That said, a registered charge does not guarantee full protection in every circumstance, but it creates a formal record that courts and lenders recognize,” she noted.
“If the marriage breaks down and the home must be sold, the registered loan is usually repaid from the proceeds before the remaining value is divided between spouses.” Parents can then decide whether to lend the funds again to help their child re-establish housing.
Ms. Bryan also strongly advised that – especially for high-net-worth individuals – when weighing whether to support a newly married child, clients treat the gift or loan with governance, not goodwill alone. Clear definition of the transfer, formal documentation and where appropriate, registration, protect both the client’s balance sheet and family relationships, while integration with broader estate plans preserves flexibility for future circumstances.
“Structuring an advance as a documented, interest-free loan can align incentives without provoking an adversarial dynamic. The capital remains an asset of the parent until repaid or intentionally forgiven, and repayment terms can be calibrated to the recipient’s capacity,” said Ms. Bryan.
Finally, she recommends running the numbers and confirming tax and reporting consequences – in particular, the Canada Revenue Agency’s rules on prescribed interest and income attribution – with legal counsel before moving forward.
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